If the Consumer Financial Protection Bureau (CFPB) has its way the good old fashioned “Loan Shark” might be the only option for the 68 million people called “Unbankable” in 2013 by the FDIC. Where did those people get the 18 billion they borrowed last year? Mostly the internet lending opportunities and local payday loan operations. That is how high risk and short term small loans are handled in America. Did you ever notice the car never breaks down at the optimum time? These higher risk and short term loans serve a valuable purpose for people with little choice. I know the interest is ridiculous! I’ve had to pay it before, but I needed the money bad enough to overlook the gouge. If the CFPB has their way these folks may be forced to find a good old fashioned “Shylock” or “Cousin Vinny” to get a little cash when it’s needed most.
The House Financial Services Committee recently had a hearing (Click here to watch it) to discuss some new rules the CFPB is looking to implement regarding short-term payday loans, longer term internet loans, and loans for higher risk people. The CFPB is run by a guy named Richard Cordray and apparently the CFPB is set up in such a way that they don’t really answer to Congress so they can act freely. Cool, huh? Only if you like to unilaterally push your economic agenda on America with no oversight. Who would do that? Yeah, it’s pretty scary the power some of these no-name agencies hold over all of us.
The CFPB wants to severely limit all the types of loans mentioned so far in this article. They’ve come up with a whole bunch of new controls. Sounds like government. Basically, they want to add some cooling off periods restricting how often a small loan can be taken out, they also want to quadruple the paperwork. Basically, they want the same documents it takes to buy a house to be applicable too borrowing $500. They have plans for curtailing longer loans as well, limiting length of the loans, limiting the kinds of loans, making impossible to have more than one or refinance a loan if you can’t pay it on time, etc…
Obviously, the plan is to annihilate the entire online loan and payday loan industry, not regulate it in the name of the victimized borrowers. Do you think a loan shark is a better way to go? If you don’t pay them…they might break a knee cap or something! All kidding aside, it has been determined that if the CFPB has their way, a black market loan system will explode in America. Capitalism does always find a way. And the 18 billion in loans last year was needed by some American in a bind and it will be needed again next year. Where will those people go for the money?
The proposals the CFPB are making virtually are actually illegal and not based on current research. The beloved Dodd-Frank bill makes all these loans legal. The CFPB is looking to circumvent that and attempt to regulate it to death…by essentially cutting the legs out from under an entire industry. I’ve about given up trying to understand government. This makes no sense and stinks of corruption. Somebody at the CFPB is on a mission. They have a target and they are going after it.
Keep an eye on the House Financial Services Committee Chairman Jeb Henslaring and see what they do about this. That’s the easiest way to find out who is in bed with whom. Watch where they come down on an issue and you will know. Otherwise if you need some extra cash, it might be good to know a guy, who knows a guy, who can help you with that, because all the legal places for short term and higher risk cash are going to be in trouble thanks to the CFPB.